Government recommits to infrastructure investment to support economy

R17.5bn provisionally set aside for infrastructure catalytic projects in MTEF.
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The government has committed to accelerating infrastructure investment to support economic reconstruction and recovery following more than a decade of stagnation. It has provisionally set aside R17.5 billion over the three-year Medium Term Expenditure Framework (MTEF) period for infrastructure catalytic projects.

“We will be accelerating investment, which is the backbone of a thriving economy,” said Finance Minister Enoch Godongwana on Wednesday during his budget speech.

Watch/read: Finance minister delivers the Budget 2022 speech

Godongwana said the government looks forward to engaging with specific infrastructure catalytic project proposals.

“Value for money and quality of delivery is the top priority in the development of the project pipeline,” he said.

Godongwana added that National Treasury will be implementing the results of a recently completed review of the Public-Private Partnerships (PPPs) framework.

He said the government aims to create a centre-of-excellence for PPPs and other blended finance projects, with this centre having direct Treasury oversight.

“It will be a direct interface with private financial institutions for investments in critical government infrastructure programmes.

“We will also work with other national departments and the provinces of the Eastern Cape and Northern Cape to pilot a revised approach to infrastructure delivery.

“This approach will include innovative financing and delivery mechanisms,” he said.

The Budget Review highlighted that the value of PPPs has steadily declined in recent years from an estimated R10.7 billion in 2011/12 to R5.6 billion in 2019/20, partly because of onerous approval processes, especially for small projects, and poor capacity of departments to estimate risk-sharing with the private sector.

The review said at the same time, lack of clarity regarding the user-pays principle affects the cost of state guarantees.

It said a PPP review concluded by the National Treasury in September 2021 emphasised the need to simplify approval and compliance requirements, and reform the policy framework to assess and prioritise PPPs.

“This is expected to encourage private sector financing solutions.

“The review recommends that government create a PPP centre of excellence, and that an expedited approval process be considered for projects below R1 billion in value.

“The National Treasury aims to implement these reforms over the next 24 months,” it said.

Godongwana added that in October 2022 he will table amendments through the 2022 Division of Revenue Amendment Bill to enable provinces to pledge their infrastructure grants to leverage more financing “to fast-track the rollout of infrastructure”.

“As we upgrade roads, bridges, water and sewer, transport, school infrastructure and hospitals and clinics, the aim is to unlock higher levels of employment for those involved in the projects,” he said.

Godongwana said the budget facility for infrastructure has approved funding for several water projects.

These included:

  • A R2.1 billion allocation for raising the Clanwilliam Dam.
  • A R1.4 billion allocation to the Lepelle [Northern] Water Board for the Olifantspoort and Ebenezer plants.
  • A R813 million allocation to the Umgeni Water Board for the Lower uMkhomazi [Bulk] Water Supply Scheme.

Godongwana also announced that the project to modernise six border posts, including Beitbridge, was at an advantaged stage of preparation.

“Feasibility studies have been completed and a request for proposal (RFP) will be issued in March 2022,” he said.

An update on government’s infrastructure investment drive in the Budget Review said public sector infrastructure spending over the next three years is estimated at R812.5 billion.

The review said National Treasury, through the Budget Facility for Infrastructure (BFI) and partnerships with the Development Bank of Southern Africa and Infrastructure South Africa, is helping to build a pipeline of viable projects.

It said the BFI has considered 61 projects submitted by public institutions and approved a total of R6.7 billion in fiscal support for them in the 2021/22 adjustments budget and over the 2022 MTEF period.

The review said most of these projects have multiple funding sources and are designed to crowd in private investment.

It added that the Infrastructure Fund is working with other public agencies to prepare six projects with a total value of R96 billion, including the rollout of broadband infrastructure and construction of six new border posts.

The review said that in aligning infrastructure investment with the National Development Plan’s infrastructure goals, government is prioritising 55 new infrastructure projects with an investment value of R595 billion that will significantly boost long term GDP growth.

It said a third of the 62 strategic integrated projects gazetted in 2020 are under construction or completed while the remaining projects, which are in the early stages of development, are receiving additional project preparation support.

“The Infrastructure Fund and Infrastructure South Africa will improve the scale, speed, quality and efficiency of growth-enabling infrastructure spending.

“The Infrastructure Fund is collaborating with other public agencies to prepare six projects with an investment value of R96 billion in higher education accommodation, social housing, telecommunications, water and sanitation, and transport,” it said.

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